Virtual modify my car online

Forget the high cost of meeting new fuel economy standards or those massive investments needed for autonomous vehicles. The biggest drain on automaker profitability in the U.S. may be the legendary impatience of American car buyers.

In 2015, less than 5 percent of new vehicles sold in the U.S. were built to customer order, according to the National Automobile Dealers Association. In Europe, the number was about 50 percent.

For U.S. dealers, that means thousands of dollars in extra floorplan expenses. For automakers, it means huge advertising and incentive costs for each unsold vehicle sitting in inventory, waiting for a buyer.

"Selling almost entirely from stock in the U.S. generates both higher stocking costs and more lost revenues, " said Ben Waller, associate director of ICDP, an automotive distribution research group in the United Kingdom.

Waller estimates that 11 to 12 percent of the sticker price of a vehicle sold in the U.S. is needed to cover the cost of stocking and selling the vehicle. And he says the cost of selling it includes discounts to attract a customer who isn't getting exactly what he wants and revenue lost when a customer won't settle for a different spec.

So why, after several attempts to change the system, do U.S. consumers still buy nearly all of their vehicles off the lot instead of ordering exactly what they want?

Remember? It wasn't supposed to be like this.

The dream was to change the way Americans buy vehicles into a more efficient, European-style, build-to-order system.

What happened to BMW's 2010 goal of a "two-week car"?

Depending on distance from the company's Spartanburg, S.C., plant and other factors, spokesman Kenn Sparks said, a customer-ordered vehicle can arrive for delivery at a dealership in as little as 10 days.

He said the percentage of customer-ordered BMWs sold in the U.S. was not available but added: "Build-to-order has long been a fundamental part of the BMW production process. That's why there are so many possible configurations of our models."

General Motors' 2000 dream was "Order it online, get it delivered to your door in four days."

GM made progress, but the effort withered amid more pressing issues.

Indeed, each promising advance toward build-to-order - flexible manufacturing, improved dealer relations, even order simplification - has failed to change old, bad, expensive buying habits.

Even with sales still riding high, U.S. inventories on May 1 reached nearly 3.9 million vehicles - the highest level since April 1, 2006. At an average cost to dealers of $27, 000 per vehicle, that's over $100 billion in inventory suffering lot rot.

But the dream has never died. Consider Cadillac's plan to move small dealerships onto virtual showrooms, using the Internet and virtual reality as a substitute for maintaining rows and rows of profit-leeching unsold cars and crossovers.

That's one reason Cadillac chief Johan de Nysschen would like to do more customer orders - at least whenever it's feasible inside GM's vast manufacturing enterprise. Beyond helping to expedite deliveries for smaller "virtual" dealers in the future, de Nysschen believes a build-to-order model adds an air of exclusivity and immersion to the customer experience.

"Johan's vision is for the customer to have more of a product-substance conversation in the showroom, rather than talking about terms and conditions and financing, " Cadillac spokesman David Caldwell said.

Cadillac has had a small taste of that vision already with the CTS-V. More than half of the roughly 2, 000 performance sedans produced for the 2016 model year were customer orders vs. 10 to15 percent for the brand's portfolio overall.

'Quite fascinating'

Europe's build-to-order system is largely a remnant of the continent's recovery from World War II. With money and materials in scarce supply, it made little sense for automakers to build tens of thousands of cars on spec and have them sit in the elements to wait for a buyer.

Audi of America sales boss Thiemo Rusch grew up in Germany and was struck by the U.S. distribution system that he found when he arrived here in 2004 - dealers selling cars from inventory.

"It was quite fascinating to understand how many things need to go right from a manufacturing and distribution perspective to make sure that the customer chooses one of your products versus one of the competition's, " Rusch said in April.

Not that some U.S. carmakers haven't been struck by the same thing. Over the years, they frequently have studied what it would take to wean American consumers off decades of buying off the lot.

Hurdles are everywhere, including a broad, multitiered supply chain already running lean with just-in-time manufacturing. Adding build-to-order would require greater flexibility in delivery of parts to assembly plants and sequencing of those parts.

In 2000, as the Internet began to penetrate American life, automakers such as Ford and GM raced to see whether they could get consumers to order cars online and have them delivered to their doors within a week.

As GM purchasing chief, Harold Kutner led the company's high-profile effort to slash delivery times. Now retired and living in Florida, Kutner, 75, said GM's goal of getting a car to a customer within four days after it was ordered was an aggressive target, and he said the company made progress.

"In 2000, if we did place a dealer-direct order, many times it took 78 days between when the dealer took the order to when the customer took delivery, " Kutner said. "When I retired in 2001, it was down to 33 or 34 days."

A GM spokesman said the company's average time from consumer order to dealer delivery is now 28 to 42 days.

See also:

  • Missed trading opportunities and how to cope with FOMO

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